On November 28th the Financial Times reported that GlaxoSmithKline, the British pharmaceutical giant, had begun exclusive talks to sell its nutrition business to Unilever. It comes after a months-long auction of the $4bn subsidiary by GlaxoSmithKline.
beat a bid from Nestle, the Swiss food and beverage group, the Financial Times reported, citing people familiar with the matter. Nestle is seeking to consolidate its market leadership in powdered hot beverages. GlaxoSmithKline's nutrition business includes the popular Horlicks malt beverage brand in India, and Horlicks' product line, which is sold mainly in Asia, is a nutritional supplement to the children's diet.
was also shortlisted for the final round of bidding, which began last September, but interest has cooled, a person familiar with the matter added.
is not yet clear about Unilever's specific offer, but GlaxoSmithKline's Indian operations are listed on the Bombay Stock Exchange and have a market capitalisation of $4.2bn. That means GlaxoSmithKline's 72.5 per cent stake in the company is worth about $3bn without an equity premium. The deal is also expected to include GlaxoSmithKline's Bangladesh-listed business.
if the deal is finalized, Unilever will strengthen its position in India. India is Unilever's most important emerging market.
In a report published in October, Andrew Wood of Bernstein Research wrote that Unilever's recent acquisition was aimed at strengthening its home and personal care division rather than food and drink, but that did not rule out medium-sized food acquisitions in a key emerging market.
declined to comment on the news.
financial times, companies are chasing the Horlicks brand in line with the need for global consumer goods companies to find assets that meet healthy and food-convenient needs. With more than 90 per cent of the company's sales coming from India, the market share of malt nutritious drinks in India is about 44 per cent, according to one analyst. This asset is a rare opportunity to get a fast-growing product in emerging markets. As per capita incomes rise, the eating habits of consumers in emerging markets are changing. India's market is only a fifth the size of China's, although its population is comparable to China's, showing great potential.
GSK reportedly sold the business because of a shift in focus under chief executive Emma Walmsley. The vast majority of Horlicks' sales come from GlaxoSmithKline Consumer Healthcare, GSK's Indian subsidiary. GSK bought a stake in Novarma for $13bn when its joint venture partner, Swiss pharmaceutical company Novarma, wanted to pull out. (News)